The Canada Health Act: Provisions & Administration

The Canada Health Act is a central element of the nation’s health care policy and federal-provincial/territorial relations. This article provides an introduction to the Act, with a focus on its purpose and key provisions, as well as its administrative bodies and processes.

The Act’s key requirements and penalties

The Act’s key administrative bodies and processes

List of article sources and links for more on this topic

What is the Canada Health Act?

Public health care and Canadian federalism

The Canada Health Act is the federal legislation that governs the operation of health care insurance in Canada. In fully understanding the Act, however, it is necessary to discuss it within the broader context of Canadian federalism.

Health Care and Federalism

Under Canada’s constitutional framework, health care policy falls predominately under provincial authority and jurisdiction. The provinces alone have the authority to regulate basic health care institutions, including the operation of hospitals, terms of employment for health care professionals, and the structure of health care insurance schemes.

The federal government, however, also plays a significant role in health care policy due to its constitutional spending powers. Under Canada’s constitutional framework, the federal government is permitted to provide program funding in any area of public policy, regardless of whether it falls under federal or provincial jurisdiction. In the context of health care, this enables the federal government to contribute financially to programs and initiatives operated by the provinces.

This federal spending power is significant in that represents a lever of federal influence over the provinces. The federal government can, for example, attempt to influence provincial health care policies and programs by making requirements of the provinces to meet certain federal standards in order to receive federal monies. If the provinces desire that federal funding, then they have little choice but to meet federal demands.

Public Health Insurance and Federal Transfers

More needs to be said about health care in this context of federalism. Canada’s modern health care system is characterized by a regime of provincial and territorial health insurance schemes (commonly referred to as Medicare). Each province and territory provides its residents with a mandatory health insurance plan. When a person receives basic medical treatment, the cost of that treatment is billed to the provincial/territorial health insurance plan, rather than the patient.

These provincial/territorial insurance plans, furthermore, operate in a “public” rather than “private” manner. In private insurance schemes, the costs of medical services are covered through a system of insurance premiums, which are paid by individuals to their private insurance company. In public insurance schemes, by contrast, the costs of medical services are covered through general government revenues. Canadians do not pay health premiums to receive their health insurance (although some provinces do charge nominal premiums to their residents). Costs are, instead, paid for through general government revenues, such as income and consumption taxes and government lotteries.

The federal government also participates in this system through its spending powers. It provides federal funds to the provinces and territories in support of their health insurance schemes (as well as for other health-related initiatives). This is predominately done through the Canada Health Transfer, which includes cash and tax transfers given by the federal government to all provinces and territories. In the fiscal year 2006-07, federal funding under the Canada Health Transfer was approximately $32.9 billion (source: Department of Finance Canada, Canada Health Transfers). This represented approximately one-third of the total $98.8 billion spent by Canadian governments on health care in 2006 (source: Canadian Institute for Health Information, NHEX Trends: 1975-2006).

Enactment of the Canada Health Act

What does all of this have to do with the Canada Health Act? In essence, the Act spells out precisely how the federal government exercises its constitutional spending powers in the provincial jurisdiction of public health insurance. The Act does so by setting out key federal conditions that must be met by the provinces/territories if they are to receive federal health care funding.

Some historical context is important here. During the 1950s and ‘60s, the federal government played a central role in developing public health care in Canada. The Government of Canada contributed approximately 50 percent of the total government health care costs, in addition to exerting strong controls over how the provinces operated their health care insurance schemes.

In the late 1970s, however, the federal government began to withdraw from its central role. It announced that it would no longer keep its commitment to pay one-half of the public health costs, in addition to ending the practice of placing restrictions on how the provinces and territories operated their health insurance schemes. As a result, the provinces and territories gained greater autonomy in the delivery of health care services. They also, however, had to bear a larger share of public health care costs.

During the 1980s, some provinces and territories began taking controversial measures to deal with rising health care costs; such measures included the introduction of user fees and extra-billing. This, in turn, raised federal concerns that the universality and accessibility of the public health care system was being encroached upon. In an attempt to curb this trend, the federal government passed the Canada Health Act in 1984. The Act prohibited the practices of user-fees and extra-billing, as well as set out general criteria regarding the operation of provincial/territorial health insurance plans.

Purpose of the Canada Health Act

More needs to be said about the precise purpose of the Canada Health Act. Section 3 of the Act declares that the objective of Canadian health care policy is “to protect, promote, and restore physical and mental well-being of residents of Canada and to facilitate reasonable access to health services without financial or other barriers.” In other words, the Act takes the position that all Canadian should have reasonable access to health services, regardless of their financial status and ability to pay.

Section 4 goes on to state the purpose of the Act within this context. It states that the Act is meant to “establish criteria and conditions in respect of insured health services and extended health care services provided under provincial law that must be met before a full cash contribution may be made.” In other words, the purpose of the Act is to promote reasonable access to health services for all Canadians by setting out national standards for provincial/territorial health insurance schemes. Further, the Act attempts to promote these standards by linking federal health funding to them.

The Act, therefore, represents a key element of federal influence in the provincial jurisdiction of health care insurance. Not only does it outline national standards for the operation of health insurance schemes, but it also commits the federal government to using its spending powers to promote those standards. If a province or territory desires its full share of federal funding, then the Act requires that province operate its health insurance plan in a manner that is consistent with national principles and standards.

It is important to note, however, that the Act represents only a financial means of federal influence. As health care is predominately a provincial jurisdiction (see above), the federal government does not possess the constitutional authority to directly regulate health care insurance. All the federal government can do is use the “carrot” of federal funding, as well as legislation such as the Canada Health Act, in an attempt to persuade provinces to voluntarily meet national standards concerning health insurance.

Provisions of the Canada Health Act

The Act’s key requirements and penalties

Overview of the Act’s Provisions

The Act sets out a total of nine requirements the provinces and territories must fulfill in order to qualify for full federal health funding. These requirements can be divided into three types: 1) general criteria for insured health services, 2) federal conditions on information and recognition, and 3) prohibitions on extra-billing and user charges. The Act also provides for two types of financial penalties: 1) mandatory penalties for violation of the prohibition on extra-billing and user fees, and 2) discretionary penalties for violation of the general criteria insured health services.

Five Criteria for Insured Health Services

Sections 8 to 12 of the Act set out the five basic criteria regarding the delivery of insured health services. These include:

Public Administration (Section 8): This criterion concerns the general administration of provincial and territorial insurance plans. The section states that such plans must be administered by a public authority that is both designated by, and responsible to, the provincial/territorial government, and which is subject to public audits of its accounts and financial transactions. The section also stipulates that the public authority must operate on a non-profit basis.

Comprehensiveness (Section 9): This criterion concerns which health services are to be covered by provincial and territorial insurance plans. The section states that such plans must cover all insured health services provided by hospitals, medical practitioners, or dentists (i.e. surgical-dental services which require a hospital setting). This section is generally understood as requiring provincial and territorial insurance plans to cover all “medically necessary” services. However, the Act does not explicitly stipulate which services this would include.

Universality (Section 10): This criterion centres on who is to be covered under provincial and territorial insurance plans. The section states a health care insurance plan must entitle 100 percent of the insured persons of the province or territory to the insured health services provided for by the plan. This section is generally understood as requiring provincial and territorial insurance plans to cover all residents. Moreover, the criterion stipulates that such coverage must be provided based on uniform terms and conditions, meaning that provinces and territories cannot provide differential coverage for different persons.

Portability (Section 11): The portability criterion concerns health insurance coverage across provincial and territorial borders, and is meant to ensure that persons have continuous access to insured health services. The section stipulates that persons must continue to be covered by their health insurance plan, even when they are temporarily outside of their “home” province or territory (be it either in another part of the country or outside of the country altogether). The section also sets out several rules in instances where persons are moving from one jurisdiction to another within the country. It allows provinces and territories to institute waiting periods before new residents are eligible for insured health services. The section, however, limits this waiting period to a maximum of three months, during which time the person is to be covered under the health insurance plan of his/her previous province or territory.

Accessibility (Section 12): The accessibility criterion asserts that provincial and territorial health insurance plans must ensure that persons have reasonable access to insured health services on uniform terms and conditions and without financial or other barriers. Moreover, the section requires provincial and territorial health insurance plans to provide reasonable compensation to physicians and dentists for the services they provide, as well as payment to hospitals to cover the cost of insured health services.

Information and Recognition Conditions

Section 13 of the Act sets out two conditions on the provinces and territories vis-à-vis the federal government. These include:

Information (Section 13.a): This section stipulates that provincial and territorial governments must provide information to the federal government for the purposes of the Canada Health Act. This would include, for example, providing information on whether a province or territory is meeting the five criteria discussed above.

Prohibitions on Extra-billing and User Charges

Finally, the Act explicitly prohibits the provinces and territories from instituting extra-billing and user charges in their health insurance schemes.

Extra-billing: The Act defines extra-billing as “the billing for an insured health service rendered to an insured person by a medical practitioner or a dentist in an amount in addition to any amount paid or to be paid for that service by the health care insurance plan of a province” (Canada Health Act, Section 2). In other words, if a medical service is covered by a provincial or territorial health insurance plan, medical practitioners and dentists are prohibited from directly charging the patient any additional fees related to that service. Such additional fees must be paid by the patient’s insurance plan. Extra-billing is seen as a barrier for people seeking medical care and is, therefore, contrary to the Act’s accessibility requirement.

User charges: The Act defines user charges as “any charge for an insured health service that is authorized or permitted by a provincial health care insurance plan that is not payable, directly or indirectly, by a provincial health care insurance plan, but does not include any charge imposed by extra-billing” (Canada Health Act, Section 2). A user charge, then, is any fee charged directly to a patient for using a publicly insured medical service. Like extra-billing, user charges are seen as a barrier for people seeking medical care.

Provisions on Interpretation and Application

In addition to setting out the nine requirements, the Act provides several guidelines on how they are to be interpreted and applied.

Non-insured services: The Act only applies to “insured” health care services, which is commonly interpreted to mean any necessary medical service provided by a hospital or physician. Additional medical services, such as pharmacare (prescription drug plans), ambulance services, or optometrist services, are not regulated by the Act.

Non-insured persons: The Act also only applies to “insured” persons, which, in relation to a province or territory, includes all residents except: 1) members of the Canadian Forces, 2) members of the Royal Canadian Mounted Police, and 3) persons serving a prison term in a federal penitentiary. These groups are covered under federal health insurance plans, and, as such, are beyond the scope of the Act (the Act deals only with provincial and territorial health insurance). Other persons, such as Aboriginal Peoples or foreign refugees, may also be excluded from the Act where their medical services are provided by federal health programs.

Penalties for Violating the Act

In addition to setting out key requirements, the Act also provides two types of penalties for the violation of those of requirements.

Mandatory Penalties for Extra-billing and User Charges: The first set of penalties are mandatory and concern instances of extra-billing and user charges. Provinces and territories that allow these practices are subject to mandatory dollar-for-dollar deductions from federal transfer payments for health care. For example, if a province allows user charges that amount to $5 million over the course of a given year, then the federal government will reduce the annual amount of health care funding it gives to that province by $5 million.

Discretionary Penalties for Violation of Five Criteria: In addition, the Act provides for discretionary penalties relating to violation of one of the five requirements under the Act (public administration, comprehensiveness, universality, portability or accessibility). These penalties are discretionary in that their application and severity is left to the judgment of the federal government in consultation with the province or territory. It is also important to note that any finding of extra-billing or user charges could also be subject to a discretionary penalty (in addition to the automatic mandatory penalty).

Since 1984, when the Act was first introduced by the federal Liberal government at the time, helmed by Pierre Trudeau, the federal government has applied the penalties in a somewhat limited fashion. In most cases, these penalties have been for extra-billing and have primarily been against the provinces of Ontario, Quebec, Alberta, and British Columbia. As of March 2007, the federal government had not yet imposed any discretionary penalties on a province or territory for violation of one of the Act’s five criteria. This is not to suggest that violations of these criteria have never occurred, but simply that the Government of Canada has not, to date, exercised its powers to punish offenders.

For more information on alleged violations of the Act and penalties imposed:

Administration of the Canada Health Act

The Act’s key administrative bodies and processes

Health Canada and the Canada Health Act Division

The Canada Health Act is administered predominately by Health Canada, which is the federal ministry or department of health. Health Canada is responsible for developing national health policy, as well as ensuring the Act’s criterion and conditions are being complied with. The Minister of Health, who is the minister responsible for Health Canada and sits in the federal Cabinet, is the primary federal representative in the Act’s administration and federal dealings with provincial and territorial governments on health-related issues. The Minister of Health usually works closely with the Prime Minister and Cabinet in developing and implementing federal health strategies.

Within Health Canada, day-to-day oversight of the Act is delegated to the Canada Health Act Division. The Division is staffed by research and policy personnel who monitor provincial and territorial health policies and programs, assess compliance with the Act, inform the Minister of any possible occurrences of non-compliance, and recommend appropriate action. The Division is also responsible for providing support to legal counsel in court cases involving the Act, as well as responding to inquiries on the Act and health issues, be it from the general public, Members of Parliament, governments, or the media.

Interprovincial Health Insurance Agreements Coordinating Committee

Another key administrative body is the Interprovincial Health Insurance Agreements Coordinating Committee. First established in 1991 as the Coordinating Committee for Reciprocal Billing, the Committee is responsible for administrating a series of bilateral provincial and territorial billing agreements for medical and hospital services. These agreements are critical to the within-Canada portability criterion under the Canada Health Act, as they enable Canadians to access insured health services when they are temporarily outside of their home province or territory. Under these agreements a patient’s health card is generally accepted, in lieu of payment, when the patient receives hospital or physician services in another province or territory. The province or territory providing the service will then directly bill the patient’s home province or territory.

The Committee is comprised of federal, provincial, and territorial health department officials. The Canada Health Act Division chairs the Committee and provides its secretariat. Members meet formally three times a year, in addition to engaging in regular communication through conference calls and written correspondence. The purpose of these interactions is to share information and to engage in collaborative problem-solving between governments.

Dispute Avoidance and Resolution Process

In addition to these general administrative structures, there is also a Canada Health Act Dispute Avoidance and Resolution Process, which was formally agreed to by the federal government and all provinces and territories in 2004. The purpose of the Process is to minimize inter-governmental conflict over the interpretation and application of the Canada Health Act.

The first part of the Process centres on avoiding disputes between governments before they occur. In this context, governments committed to:

Undertake government-to-government information exchange, discussions and clarification on issues as they arise.

The federal government also agreed to provide advance assessments to any province or territory upon request.

In cases where dispute avoidance is unsuccessful, the Dispute Avoidance and Resolution Process also sets out specific procedures for dispute resolution. These include:

Initiate dispute resolution: Any level of government may initiate dispute resolution by submitting a letter to the other disputing parties outlining the nature of the disagreement. Once initiated, dispute resolution precedes any other actions (for example, the federal government cannot penalize a province or territory under the Act once dispute resolution has begun).

Negotiation by parties: Within 60 days of the date of the letter initiating the process, the governments involved in the dispute must 1) collect and share all relevant facts, 2) prepare a fact-finding report, 3) negotiate to resolve the issue in dispute, and 4) prepare a report on how the issue was resolved.

Third party panel: If the issue cannot be resolved through negotiation, then any government involved with the dispute may refer the issue to a third party panel. Such panels are composed of one provincial/territorial appointee and one federal appointee, who, together, will select a chairperson. The panel will assess the issue in dispute, undertake fact-finding, and provide advice and recommendations to the disputing parties (within 60 days of its appointment).

It is important to remember, however, that the recommendations of the third party panel are not legally binding and the federal government has absolute final authority regarding how to interpret and apply the Act.

As of March 2007, the Process had only been used once, with limited success. In 2005, the federal Liberal government, helmed by Paul Martin, sent a letter to the Government of New Brunswick initiating dispute resolution over the Province’s refusal to cover medically necessary abortions delivered in private clinics. The Province, however, refused to alter its restrictive abortion policies and did not participate in the subsequent 60-day fact-finding and negotiation process. The new Conservative federal government, elected in 2006 and led by Stephen Harper, has yet to continue the Process. As of March 2007, no further progress has been made on the issue.